Riding the Wave: Global Trends

Success in the business world can be compared to surfing: A surfer sits on their surf board behind the breaking waves staring out at the horizon watching for the next big wave. When they see a big wave building up they turn their board toward the shore, lie down and begin paddling to build some forward momentum so that when the wave reaches them, they can catch it and ride it towards the shore. The bigger and more powerful the wave the better the ride. To be successful in business one also needs to ride waves, these waves are called trends. As an entrepreneur one needs to be “looking over the horizon” for the next big trend and positioning oneself to ride the trend when it arrives. The bigger and more powerful the trend the more successful the ride.

Trends are directional tendencies in lifestyle, commerce or demographics. They may be obvious or imperceptible.

Here are some of the trends shaping the world around us:

West to East Power Shift: Economic power is shifting to Asia in terms of investment and output, with a growing “middle class” globally, but consumption remains driven by developed markets.
The Nub:
The percentage of manufacturing imports of high-income countries from developing countries had risen from under 15% in the 1970s to nearly 40% in 2003 and is projected to reach 65% in 2030.
Global output, on current trends, will double from 2005 to 2030; developing countries’ share will rise from 23% to 31%.
By 2030 over a billion people will form a new global middle class, around 16% of the world’s population versus 8% in 2000.

New Consumer Groups Emerging: Globally the population is becoming older, more urban and Asian, with increasing diversity as more people are on the move - new consumer groups are emerging, demanding more involvement in and customization of consumption experiences.
The Nub:
By 2015, there will be at least 750 million more people in the world, 97% of the increase will be in developing countries.
By 2050, 1 in 3 people in developed countries will be aged 60+, with 2 older people for every child (13).
A new generation of content-creating and publishing communities, e.g. YouTube, is driving new business models, as well as technical and environmental headaches.
In 2006, approx 161 billion gigabytes of digital information was created, captured and replicated – that’s more than 3 million times the information in all the books ever written.
Between 2006 and 2010 the amount of information added to the digital universe each year will increase sixfold.

War for Talent: A raging global war for talent for both skilled and “low cost” jobs is increasing. Asia continues to become increasingly important and outsourcing is on the rise within and across borders.
The Nub
By 2020 there will be 600 million more people active in the economy, mainly in the developing world – where labor costs will continue to be low, although increasing fast along with productivity.
Labor supply will generally shrink in the developed economies.
Low skilled workers will come under increasing pressure globally – the nature of work is shifting to require higher skills as businesses become more knowledge and service intensive.

Changing Geopolitical & Security Landscape: The networked global economy is being driven by rapid and largely unrestricted flows of information, ideas, cultural values, capital, goods and services, and people. Globalisation is enabling new dimensions of power beyond military might, including economics, resources and technology, but the new global landscape is not yet stable: risks and uncertainty are rising with the unrestricted flow of information. Regions, countries, and groups feeling left out and left behind will face deepening economic stagnation, political instability, and cultural alienation. This will foster political, ethnic, ideological, and religious extremism, along with the violence that often accompanies it.
The Nub:
Geopolitical instability is increasing – at the same time as trust in international institutions and the US is decreasing.
There are existing tensions between “old” and “new” powers e.g. between China and Japan, the US and Russia, India and Pakistan, based on history – and new ones emerging as the global economy shifts east, e.g. isolationist sentiment in the US.

Serious Resource Strain: Basic resources are under threat, including water, energy, food and habitats/climate as consumption rises faster than the planet can sustain it – public and institutional activism is rising. Al Gore and many others are raising awareness of the grave threat of global warming and slowly the response to these threats is gaining momentum in political, social and economic spheres.
The Nub:
Researchers estimate that in 2002 humanity was consuming ecological resources 23% faster than the Earth can replenish them.
The cost of climate-related events is growing: financial losses from weather-related disasters in 2005 were estimated as the largest ever at US$ 200 billion.

Changing Technology Landscape: A global technology revolution continues to evolve, crossing national borders and scientific disciplines – biotechnology, nanotechnology, media technology, mobile technology and information technology will continue to reshape industries and our daily lives.
The Nub:
By 2020, feasible technology applications include: widespread cheap solar energy using nanotechnology breakthroughs and mass-producible organic electronics, targeted drug delivery through molecular recognition and wearable computers
In just 12 years since the first GSM digital mobile network, telephones have been transformed into small but powerful multipurpose terminals. The future will bring further, revolutionary changes in this market.
Media technology will make everything personal, customized - it will transform the way we access, store and retrieve information.
In 2006, BAe announced the creation of an artificial surface that grips incredibly tightly without glue or pressure – inspired by the gecko’s ability to run up vertical surfaces.

Accountable or Nothing: Non state actors ranging from business firms to nonprofit organizations are playing increasingly larger roles in society. The stakeholders of such institutions are actively demanding transparency and accountability. The quality of governance will substantially determine how well organisation and societies cope with global forces and challenges. Corporations with ineffective governance will not only fail to benefit from globalisation, but may be vulnerable to major failures and financial downfall, ensuring an even wider gap between the eventual winners and losers.
The Nub:
The number of international NGOs with membership doubled from 1990 to 2003, to almost 300000.
Overall 67% of consumers in the US and Europe claim to have boycotted a food, drinks or personal care company's goods on ethical grounds.
Trust in global companies has fallen faster than for other institutions such as the UN from 2001 to 2005.

Open-sourcing Innovation and Knowledge Generation: Exploding connectivity and channels for information are making open-source innovation a global imperative – networking and linking in with broader knowledge and idea sources is critical, but gaining an edge and protecting knowledge is tough.
The Nub:
Surveys suggest R&D spending levels had no apparent impact on sales growth, gross profit, operating profit or market capitalization. The only relationship was to gross margin, but once non-operating costs were added in the link between spend and performance disappeared – “the R&D silo is succeeding in the traditional role of making “better mousetraps”… But these…aren’t catching more mice.” Only 10% of companies produce significantly better performance per R&D dollar compared to others in their industry.
P&G has succeeded by shifting from a R&D Strategy to a Connect and Develop Strategy i.e. a strategy in which they look outside the organisation for solutions and ideas as oppose to relying on just the R&D Dept.

Business Model Shifts: Business models are becoming global AND local, as shifting power along the value chain and the emergence of BRIC multinationals means more intense competition – innovation is critical to avoid being “stuck in the middle.” Companies are being forced to decide what they do and more importantly what they don’t do so as to create competitive advantage in relation to a much wider array of players.
The Nub:
In Europe by 2011 74% of adults will shop online versus 58% in 2006 – 176 million shoppers, up from 100 million.
Record levels of M&A are radically restructuring industries, with outbound deals from BRIC countries accelerating dramatically.
Fluid, extended network business models are taking over from “straight-line” value chain configurations – increasing complexity and pressure on margins.

References
These ideas are gleaned from:
1. Forty Key Trends for the Next Decade: 20 Key Global Trends and 20 Key Consumer Trends 2005-2015, Published: November 2005 Published By: Euromonitor International
2. World Bank Reports
3. IDC White Paper, The Expanding Digital Universe, March 2007
4. IMD Summary on Global Trends